Full-year results for the year ended 30 April 2022

DWF Group plc

("DWF" or "the Company" or "Group")

LEI: 213800O9QREOHTOGQ266

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

21 July 2022

Full-year results for the year ended 30 April 2022

Sustainable profitable growth, working capital improvement and increased operating efficiency

DWF, the global legal business, today announces its full-year results for the year ended 30 April 2022. The Board is delighted with another performance in line with market expectations, and reflecting significant progress towards medium term targets.

GROUP FINANCIAL SUMMARY

FY2021/22 HIGHLIGHTS

· Group net revenue growth of 4% (7% like-for-like)3 to £350m. Reported revenue growth of 4% to £416.1m.

· Gross margin improvement to 51.7% (FY21 50.8%) reflecting delivery efficiency and pricing.

· Cost to income ratio improved by 0.8ppts versus FY21 to 38.4%, now just 0.4 percentage points higher than the medium term guidance issued in July 21, targeting 38%.

· Adjusted PBT up 21% to £41.4m, reflecting the sustainability of top line growth, gross margin improvement and cost control demonstrated over the previous three reporting periods.

· Adjusted PBT margin of 11.8%, an increase of 1.7 percentage points on FY21 and 6.7 percentage points ahead of FY20.

· Reported PBT of £22.3m (FY21 loss of £30.6m), which differs to Adjusted PBT due to adjusting items of £19.1m (FY21 £64.8m).

· Adjusted diluted EPS of 10.7p (FY21 7.4p) a 44.6% increase on prior year and 0.7p (7%) ahead of expectations.

· £12.9m free cash flow generated (FY21 £32.1m) after repayment of all remaining COVID-19 VAT deferrals of £10.7m. Adjusting for timing would give an underlying FY22 position of £23.6m. This compares to free cash flow of £32.1m in FY21 which was a period that benefitted from cash inflows from a significant lock-up day decrease of 20 days.

· Net debt of £71.8m is £11.6m higher than FY21 due to repayment of COVID-19 VAT deferrals and acquisition related payments, and has reduced from HY22 by £5.4m, highlighting the Group's cash generation. Leverage is broadly flat at 1.08 x EBIDTA (FY21 1.04).

· Balance sheet liabilities relating to deferred consideration and COVID-19 deferrals are £0.9m (FY21 £16m) reflecting a robust year-end balance sheet position.

· A 5-day (3%) reduction in lock-up days versus FY21 reflects continued progress on Group-wide initiatives to improve working capital efficiency.

· Net revenue per partner1 increased by 6% to £975k.

STRATEGIC HIGHLIGHTS

· New 3-division operating structure fully embedded to provide a platform for sustainable, profitable growth.

· Two acquisitions in Connected Services have bolstered an already very strong organic trajectory and there is a significant pipeline of M&A opportunities to explore.

· Property strategy under review with an estimated 1/3rd of global office space considered as potentially surplus to requirements post-COVID, representing a c£7m recurring annualised saving opportunity in the medium term.

· Client stratification and pricing initiative launched to ensure key client requirements are fully understood and priced appropriately.

· An increasing number of our clients now receive services from two or more of Legal Advisory, Connected and Mindcrest, representing a proof point for the Integrated Legal Management Strategy.

· Wins in FY22 include the UK central government legal services panel, NHS Resolution, Allianz and LV=.

OUTLOOK AND CURRENT TRADING 

· The first two months of trading for FY23 have been strong, showing continued momentum in line with Q4 of FY22.

· Whilst the Board is mindful of inflationary pressures and the wider economic backdrop, DWF has resilient revenues, a countercyclical litigation focus, and recurring revenues in insurance providing a natural hedge against economic headwinds. We remain well placed to continue delivering on our growth strategy and confident in our medium-term guidance.

· Execution of the property strategy is expected to make a material contribution towards cost control for FY23 and FY24, with other back office initiatives offering potential for further operating efficiencies.

· For FY2021/22, the Board has declared a final dividend of 3.25p per share, taking the total dividend for the year to 4.75p, reflecting a pay-out ratio of 44% of adjusted profit after tax. This pay-out ratio reflects a progressive dividend in absolute terms, but retains a proportion of FY2021/22 profits to invest in near-term growth opportunities.

Sir Nigel Knowles, Chief Executive Officer, commented:

"We are delighted with the progress we have made this year. We have achieved a record set of results with net revenue growth taking us to £350m in scale, adjusted profit before tax up by 21% to £41m and lock-up days continuing to fall, down to 179. Our adjusted diluted earnings per share are up by 45% to 10.7p with our diluted earnings per share increasing to 6.5p, our strongest results since IPO.

"These results have been made possible through the continued transformation of our business, not least the successful implementation of our new global operating model which was introduced on 1 May last year. As anticipated, this has resulted in the greater integration and alignment of our colleagues and services, for the benefit of our clients. It has also supported our integrated legal management approach, our key differentiator which is helping us to gain share of wallet against both traditional and new competitors.

"Despite the prospect of challenging macro-economic conditions, we remain confident in our medium-term guidance. This confidence is supported by the defensive nature of the Group's revenue being weighted towards litigation and the recurring revenue base in Insurance, which has always protected the Group both from artificial peaks in growth and hedges against a slowdown in transactional activity. Similarly, we are confident that our balanced approach of competitive reward, including our unique ability to offer share awards, combined with a more progressive working environment will position us favourably in the 'war for talent'."

The person responsible for making this announcement on behalf of the Company is Chris Stefani, Group Chief Financial Officer.

About DWF

DWF is a global provider of integrated legal and business services provided through its three offerings of Legal Advisory, Mindcrest and Connected Services. It has offices and associations located across the globe. The Company became the first Main Market Premium Listed legal business on the London Stock Exchange in March 2019. DWF recorded Revenue of £416m and Net Revenue of £350.2 million in the year ended 30 April 2022. For more information visit: dwfgroup.com

Effective from 1 May 2021, the Group transitioned to a new internal operating structure which supports its aim of becoming the leading global provider of integrated legal and business services. DWF has moved from its previous five divisions (Commercial Services, Insurance Services, International, Connected Services and Managed Services) into three more streamlined and efficient global divisions of Legal Advisory, Mindcrest and Connected Services.

Together, the three divisions support DWF's single Integrated Legal Management approach through which the Group can seamlessly combine any number of these services to deliver bespoke solutions to its clients with greater efficiency, price certainty and transparency. This approach enables DWF to offer clients solutions that combine traditional law firm services with new, modern legal and business services relevant to today's companies and the challenges and opportunities they face.

Forward looking statements

This announcement contains certain forward-looking statements with respect to the Company's current targets, expectations and projections about future performance, anticipated events or trends and other matters that are not historical facts. These forward-looking statements, which sometimes use words such as "aim", "anticipate", "believe", "intend", "plan", "estimate", "expect" and words of similar meaning, include all matters that are not historical facts and reflect the directors' beliefs and expectations and involve a number of risks, uncertainties and assumptions that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement.

1 Described in the glossary to the financial statements

2 Gross profit margin is defined as gross profit divided by net revenue.

3Like‐for‐like ('L4L') net revenue growth removes both the impact of acquisitions and restructured operations (closures and scale-backs)

CONCERT PARTY UPDATE

Following consultation with The Takeover Panel ("the Panel"), the Panel has agreed that the concert party, originally agreed with the Panel at the time of the IPO of DWF Group plc ("DWF") in March 2019, will be amended to reflect changes in circumstances and the passage of time.

At the time of the IPO, DWF agreed with the Panel that the following persons were acting in concert in respect of DWF:

(a) the partners of the Group's legal businesses (current or promoted or appointed in the future) who become shareholders of the Company; and

(b) the two Employee Benefit Trusts.

DWF has now agreed with the Panel that the persons who now form a concert party in relation to DWF pursuant to The Takeover Code comprise the following persons, together with their respective connected persons:

As at the date of this announcement, the concert party members hold 3.97 per cent. of the Company's voting share capital in aggregate.

CHAIR'S STATEMENT

I am delighted to welcome you to our Annual Report and Accounts for the year ended 30 April 2022. We have experienced another year of global volatility, with the economic recovery from COVID-19 impacted by inflationary pressures and the terrible events in Ukraine. Throughout this period, DWF has focused on living its purpose as we seek to deliver positive outcomes with our colleagues, clients and communities.

This focus on purpose is central to the culture of our business and a critical reason why we have performed well. I would like to offer my thanks, and the thanks of the whole Board, to all of our colleagues across the Group for their continued commitment, dedication and high-quality delivery throughout the year.

Group performance

In my statement in last year's Annual Report, I said that our FY2020/21 performance had provided the Group with a platform to deliver sustainable profitable growth. That has certainly proven the case this year, with both revenue and statutory profit growth and a further reduction in lock-up days, reflecting continued progress in improving our operational efficiency.

Our like-for-like net revenue growth rate of 7% is strong and sustainable (reported revenue growth is 4%). We have good momentum from the final quarter of FY2021/22 which has continued into this new financial year and so we look forward with optimism.

Our new global operating structure, which came into effect on 1 May 2021, is delivering the benefits of greater integration and alignment of our colleagues and services for the benefit of our clients. We see the impact of this with more of our largest clients interested in our ability to offer a global, Integrated Legal Management approach. We have secured a number of important client wins including the UK central government legal services panel, NHS Resolution, Allianz and LV=. We also saw a sharp rise in our Net Promoter Score, which Sir Nigel talks more about in his Q&A.

Leadership

It has been a year of stability, with no changes to the Board. I would like to thank all of our Board members for their time and focus throughout this year. I would particularly like to thank Seema Bains and Michele Cicchetti for their invaluable contributions and diversity of thought and experience as Partner Directors on the Board.

Culture

Our vision is to create a culture and working environment where all colleagues can contribute authentically at their highest level to create long-term value aligned to our purpose and vision. This means a sustainable business where everyone is included, engaged, valued and equipped with skills for today and the future.

We know from our colleague engagement survey, which saw an increase in respondents as compared with the last survey, that 89% feel treated with respect by their colleagues and 87% feel they can be themselves at work. For the first time, we asked colleagues if they feel supported to adopt a hybrid model of working. We were pleased to find that 83% do feel supported, which reflects the focus given to this topic as more and more of our colleagues work in this way.

Our overall colleague engagement score of 76 has remained consistent despite significant periods of change over the past two to three years, both in the business and in the general global economic and working environment.

We are proud that our main colleague recognition programme, The Rubie Awards, saw a record number of submissions this year. More than 800 colleagues took the time to nominate one of their peers for an award, whilst there were around 15,000 instant recognitions through our Achievers platform. This focus on colleague recognition is an important element of the culture we wish to create, ensuring everyone feels recognised, respected and thanked properly for their contribution to the overall success of the Group.

Culture is also at the heart of our workplace strategy. As we prepared for COVID-19 restrictions to ease across our locations, we consulted regularly with colleagues through surveys and workshops to ask them how, where and when they want to work. Their views and preferences have been reflected and now more of our colleagues than ever are benefiting from our hybrid working model, which continues to develop through our workplace strategy. 

Our role in society

ESG has been one of the core areas of focus for the Board this year, with Kirsty Rogers, Group Head of ESG, joining us at our Board meetings on a regular basis to discuss progress in the formulation and delivery of our first global ESG Strategy. I am delighted that this strategy was published in December, with Shareholders provided with an opportunity to hear about it at our half-year presentation.

Through this strategy, we have committed to ambitious science-based targets to drive climate action and to stretch targets to further improve Diversity & Inclusion and social mobility.

Early actions taken since publication of our strategy include launching our ESG Client Policy and establishing our Risk & Sanctions Committee. We have also introduced D&I objectives for all people managers, secured approval of our climate targets from the Science-Based Targets initiative and achieved Bronze Standard from the Carbon Literacy Project.

We have also developed a programme of activities and resources to support colleagues' physical and mental health, led by the Group's Wellbeing Committee.

Stakeholders across the sector are holding legal services providers to account for their actions on ESG. Employees, clients, communities and regulators, expect firms to lead with purpose and to have a clear strategy for improving performance on ESG matters. DWF's own research has found that companies risk losing clients and talent if they have weak ESG performance.

ESG is a critical business issue, which is why we focus on it so closely.

I talk more about our purpose, values and culture in the Governance introduction. You can read more detail on our priorities and actions in our separate Sustainability Report. These will be reported in our Annual Report and Accounts.

Dividend

The Group's capital allocation policy prioritises having sufficient capital to fund ongoing operating requirements, and to invest in the Group's long-term growth. Taking this into account, the Board targets a pay-out ratio of up to 70% of adjusted profit after tax. For FY2021/22, the Board has proposed a final dividend of 3.25 pence per share, representing an increase of 8% on the final dividend paid last year and, taking the total dividend for the year to 4.75 pence, reflecting a pay-out ratio of 44%. This pay-out ratio reflects a progressive dividend in absolute terms, but retains a proportion of FY2021/22 profits to invest in near-term growth opportunities. If approved by Shareholders at the forthcoming Annual General Meeting, the final dividend will be paid on 7 October 2022 to all Shareholders on the register on 9 September 2022. Details of our dividend policy will be reported in our Annual Report and Accounts.

Remuneration Policy

Our Remuneration Policy is being put before Shareholders for approval at our forthcoming Annual General Meeting. The Remuneration Policy was reviewed by the Remuneration Committee to ensure it continues to support delivery of our business strategy. Following that review, some minor amendments are proposed in order to provide greater clarity and to add limited additional flexibility in specific areas. More information is available in the Remuneration Report, which will be reported in our Annual Report and Accounts.

Annual General Meeting 2022

The Annual General Meeting will be held on 28 September 2022.

Looking ahead

The first two months of trading for FY2022/23 have been strong, showing continued momentum in line with Q4 of FY2021/22. As we progress through FY2022/23, we will continue to execute effectively against our strategy to drive profitable growth through our Integrated Legal Management proposition. Despite the prospect of challenging macro-economic conditions, we remain confident in our medium-term guidance.

Jonathan Bloomer

Chair

20 July 2022

CHIEF EXECUTIVE OFFICER'S Q&A

How did the Group perform this year?

We are pleased with the progress we have made this year. FY2020/21 was a transformational year for our business and, in FY2021/22, we have continued to transform, not least through the successful implementation of our new global operating model. We have also embedded our working capital and client programme initiatives introduced in the prior year and are benefiting from the impact of various office restructures. Together, these actions have contributed to a year of sustained profitable growth. Adjusted profit before tax increasing by 21% against a strong prior year is a result we are proud of and has been achieved thanks to margin improvement across each of our three divisions combined with ongoing rigour in our control of costs. This has also led to a return to a statutory profit before tax for the year of £22.3m (FY2020/21: loss of £30.6m).

Our performance this year is evidence of the increasing maturity of our business, the appeal of our offering to clients and our confidence in the medium-term targets we have outlined to Shareholders. With like-for-like growth of 7%, we have demonstrated that we are on track to deliver the top-line performance implied in our guidance. Some of our transactional practices had outstanding double-digit growth, but we also have the bedrock of Insurance in our business which, whilst it tends to grow at a slower rate, helps to protect the business from the volatility that can be seen in more transactionally focused businesses.

How are clients responding to DWF's Integrated Legal Management approach?

In short, very well. We continue to see an evolution in the legal services market, with changing buyer behaviours and an increasing demand for alternative legal services and related business services. Our differentiated proposition leaves us really well placed in this regard and we have seen a growing number of our key clients taking services from more than one division.

We work with Deep-Insight, a research company with more than 20 years' experience with large B2B organisations, to carry out regular independent customer relationship quality assessments, including calculation of our net promoter score.

We were delighted that our ability to provide an integrated solution to our clients' challenges, in more markets than ever, was a factor in the strong net promoter score of +63 in our census of more than 500 clients.

This year we commissioned independent research from Thomson Reuters, the findings of which support our confidence in our business model. Their analysis shows that the legal services market overall continues to grow, but with the strongest growth in the ALSP market. They also found that traditional law firms are evolving but are failing to adapt quickly enough to respond to new competitors, or to differentiate their services by offering alternative approaches.

Our highly differentiated proposition and stellar client base leaves us well placed to compete effectively against traditional and new legal services providers. As we talk to our largest and fastest-growing clients about the benefits of our proposition, we are already beginning to capitalise on these shifting market dynamics.

How has 'The Great Resignation' and the 'war for talent' affected DWF this year?

There is no doubt that this has been one of the biggest issues facing the legal sector and other professional services over the past 12 months. Similar to other professional services firms, we have seen attrition levels increase and it will remain a challenge for our business in the year ahead, but we are confident in our balanced approach, which responds to external market factors whilst also offering a more progressive working environment and seeking to capitalise on our ability to use share incentives as part of our reward strategy.

As I commented during this financial year, offering more and more money to young people is only a sticking plaster. It is not a sincere, sustainable or healthy solution for anyone. Of course we must ensure pay is competitive, attractive and a fair reward, but we believe there must be more than this one-dimensional offering.

We have emphasised our purpose-led approach, delivering positive outcomes with colleagues, clients and communities. We have committed to clear and ambitious targets on climate, diversity and inclusion through our ESG strategy, offering all colleagues the opportunity to get involved and drive progress. We have delivered a true hybrid working model through which our offices are just one environment in which colleagues and clients work and collaborate. Shortly after this financial year-end, we appointed advisors to work with us on improving the design of our offices to ensure they are fit for these new ways of working.

Furthermore, we have reviewed our reward offering, including a comprehensive pay review, share awards to more than 650 colleagues and reducing the vest period for colleagues to receive such awards in future. In the UK, we have also significantly improved our family friendly policies, demonstrating to existing and potential colleagues that we put them first when events in their lives naturally take priority over their work commitments. Working with our country leadership we will look to roll out many of these policies globally moving forward.

In FY2021/22, you extended your capabilities through new offices, associations and M&A in Saudi Arabia, Portugal, Spain and Canada. Why those markets, and where next?

We have a client-led approach to our global expansion. In late FY2019/20 and early FY2020/21 we conducted a global review to identify those markets where we felt we needed a presence, either through a DWF office or via a local association. This work helped us to identify priority markets and we are pleased with the progress made in the past 12 months.

We returned to M&A early in FY2021/22 through two bolt-on acquisitions in the UK and Canada within Connected Services. We also have a strong pipeline of M&A opportunities and anticipate having more to report in the short to medium term.

Our Saudi business is performing well and has won a number of instructions, including with Engineer Holding Group and its subsidiary, the Saudi Media Company. We are also pleased with our new association relationships, including our affiliation with Hauzen LLP in Hong Kong which we announced in May this year. We now have association relationships in eight markets, including our first Connected Services association with RTS Group in Iberia and Latin America.

What is the outlook for the year ahead?

The first two months of trading for FY2022/23 have been strong, showing continued momentum in line with Q4 of FY2021/22. Despite the prospect of challenging macro-economic conditions, we remain confident in our medium-term guidance. This confidence is supported by the defensive nature of the Group's revenue being weighted towards litigation and the recurring revenues in Insurance, which has always protected the Group from artificial peaks and hedges against a slowdown in transactional activity.

Sir Nigel Knowles

Group Chief Executive Officer

20 July 2022

FINANCIAL REVIEW

Profitable growth, working capital improvement and strong balance sheet

A record year of profitable growth

The Group has delivered another year of record results with FY2021/22 being the first full year under new leadership. These results include reported revenue growth of 4% to £416m (PY: £401m), net revenue growth of 4% to £350m (PY: £338m), a 21% increase in adjusted profit before tax to £41m (PY: £34m) and a return to statutory profit before tax of £22m (PY: loss of £31m).

Diluted EPS has increased to 6.5p (PY: loss per share of 11.9p) and Adjusted Diluted EPS has increased to 10.7p (PY: 7.4p), a 45% increase and a record since IPO. The Group has also reported lock-up days of 179 (PY: 184 days), the lowest level for six years even with revenue growth of 88% over the same time period. The Board has declared a final dividend of 3.25p per share, taking the total dividend for the year to 4.75p (PY: 4.5p). This reflects a progressive dividend in absolute terms, but retains a proportion of FY2021/22 profits to invest in near-term growth opportunities.

Strong activity levels have led to like for like1 net revenue growth of 7%, despite having experienced high levels of COVID related absence in Q4 as UK COVID cases peaked due to the spread of the Omicron variant. Gross margin has increased by 0.9% to 51.7% despite ongoing inflationary pressures including the continued investment into reward through the annual salary and benefits review. The Group's cost-to-income ratio has improved to 38.4% from 39.2% in FY2020/21. This is another record for the Group since IPO and is a result of the continued focus on cost control and operating discipline under the new leadership team.

In FY2021/22, the German operations have been scaled-back as a result of the ongoing focus on profitable growth. The Berlin office has been closed and a small number of people have departed the business in other locations within Germany. This is consistent with similar actions taken elsewhere in the past two years, most notably in Dubai and Australia, which have seen significantly improved performance since restructuring. Costs associated with the scale-back of German operations have been offset by a reversal of a provision relating to the Australia scale-back as vacant properties have been subsequently sublet. This has resulted in a credit of £0.2m in the year for office closures and scale-backs which has been recognised as non-underlying administrative expenses in the income statement. 

The Group has returned to M&A in the year with the acquisition of Zing 365 Holdings Limited ("Zing") and Barnescraig & Associates ("BCA") which have been complementary acquisitions for the Connected division. The Group also has a healthy pipeline of M&A targets as we enter FY2022/23. As well as the return to M&A, the Group continues to grow internationally through an expansion of its associations, in particular Al-Ohaly & Partners in the Kingdom of Saudi Arabia, Nobre Guedes & Associados (NGA) in Portugal and RTS Group (RTS) based in Spain. Since the year end the Group has also announced a new association with Hauzen LLP based in Hong Kong.

The Group has produced a statutory profit before tax of £22m (FY2020/21: loss before tax of £31m) with the prior year loss being driven by significant adjusting items totalling £64.8m, the majority of which related to expenses which formed part of the purchase price of the RCD acquisition. On an adjusted basis, the Group achieved adjusted profit before tax of £41m (FY2020/21: adjusted profit before tax of £34m), an increase of 21% on the prior year.

As well as achieving strong profitable growth in the year, the Group has also continued to strengthen its balance sheet with net assets increasing by £16m, which includes a £32m increase in net current assets. Net debt has increased by £12m to £72m (FY2020/21: £60m) but this is principally down to the payment of COVID-19 VAT deferrals and acquisition related payments totalling £14m. The remaining deferred liabilities on the balance sheet are just £0.9m, compared to £28m at the end of FY20.

Lock-up days have again reduced due to ongoing operational initiatives and stand at 179 days, a 5 day reduction from April 21.

The Board is pleased to see further progress towards medium term targets which were communicated in July 21. The Group continues to focus on profitable growth, which moves the adjusted PBT into benchmark range with the remaining listed legal business and some comparators in the broader professional services space. Working capital has also improved with a further reduction in lockup days. Whilst there are widely reported upward pressures on staff costs in the sector and broader inflationary pressures, the Group believes it is well placed to retain key talent and to mitigate other cost pressures through specific cost reduction initiatives such as the premises strategy.

____________________________________

1Like for like net revenue growth excludes the impact of acquisitions in the current and preceding year as well as the impact of scale-backs and closures

Revenue

Revenue for the year is £416m (FY2020/21: £401m) representing growth of 4%. However, the Group focusses revenue measurement on net revenue as revenue is distorted by the level of recoverable expenses incurred on delivery of client matters where such expenses do not necessarily reflect the activity levels of the projects or the business.

Net revenue for the Group was £350m (FY2020/21: £338m) representing like for like growth of 7% which excludes the impact of the acquisitions of Zing and BCA as well as the scale back of operations in Australia and Germany. DWF's biggest market, the UK, has seen net revenue growth of 7%.

Divisional performance

Effective from 1 May 2021, divisional performance has been reported to the PLC Board under the new global operating structure that comprises the three divisions of Legal Advisory, Connected Services and Mindcrest. The implementation of this new structure has resulted in greater integration and alignment of our people and our services and supports the continued execution of the Group's strategy.

Highlights of the performance by division are set out below:

Legal Advisory (83% of Group Net revenue / 85% of Group Gross profit)

Newly formed in FY2021/22, the Legal Advisory division has delivered like-for-like net revenue growth of 7%. This growth has been accomplished whilst holding overall direct costs in line with prior year despite inflationary cost pressure, resulting in a 1 percentage point improvement in gross margin to 53%.

Within Legal Advisory, the Insurance business has delivered growth of 3%. This has arisen from new contracts secured (for example with LV=/Allianz and NHS Resolution), continued expansion of our specialist London Market practice and international presence, and an increase in claim volumes following the easing of COVID-related restrictions. This has offset the slower post-pandemic recovery of claims volumes in other isolated sectors of Insurance and the non-recurrence of one-off additional COVID-related work in FY2020/21 that arose from the FCA business interruption litigation.

UK Corporate, Finance and Restructuring, and Real Estate businesses have collectively grown by 17%, with a strong rebound in transactional areas following the easing of lockdown and conclusion of Brexit.

The Dispute Resolution practice area has continued to attract a healthy pipeline of work during FY2021/22, which has resulted in like for like growth of 8% across all geographies.

A number of international locations, across Europe and the Middle East, have seen particularly positive results (including revenue growth of 41% in Italy and 9% in Spain), with increased collaboration as a result of the revised Group structure enhancing the division's performance.

A year on from establishing the new divisional structure, the outlook for FY2022/23 is positive, with a strong pipeline of work in place and greater efficiencies being delivered through innovative ways of working, both between practice areas and with our clients. Plans are already underway to continue the development of key locations (in the UK and further afield) and expand into new locations which, alongside continued investment in our people, will support future growth.

Connected Services (10% of Group Net revenue / 8% of Group Gross profit)

The Group's Connected Services division continues to deliver strong profitable revenue growth delivering net revenue growth of 19% to £33.9m, or 10% on a like-for-like basis which excludes the growth brought by the acquisitions of BCA and Zing365 in May 2021. The cultural integration of both acquisitions has been successful and they are both working closely with colleagues across Connected Services and the rest of the Group to share clients and enhance their pipeline.

We are particularly pleased that all service lines have grown compared to the prior year. Our Claims Management and Adjusting business (with presence in Australia, Canada, France, Ireland, Italy, UK and USA) has grown by 32%, or 17% on a like-for-like basis, due to significant new client wins in the UK and USA, an increase in claims volumes as COVID-19 restrictions eased and the continued receipt of business interruption claims. This is despite the disruption in Australia due to extended local lockdowns.

The launch of the Global Entity Management proposition has been a success, with seven new clients secured and an operating system developed in collaboration with our software team '360'. Investment in a sales and marketing team, with an initial focus on 360, has resulted in net revenue growth of 19% and the development of a strong pipeline as we enter the new financial year.

One of our larger businesses, Ges-Start (DWF Spain's Connected Service which offers Accounting, Tax and Labour consulting), has grown net revenue by 16% and gross profit margin by 6 percentage points due to their recurring client base being complemented by a number of large new projects and a focus on cost control.

As the division continues to mature, profitability has improved with gross profit margin increasing to 44%, 2 percentage points ahead of the prior year. Although net revenue has grown by 19%, direct costs have only increased by 16% as the division invests in technology solutions to deliver work more efficiently and effectively.

Connected Services also plays an ever increasing role in providing integrated solutions for clients and provided record fee referrals to Legal Advisory in excess of £8m (PY: £7m), as the benefits of the new operating structure start to be realised.

Management continues to look to the future with confidence, assisted by a strong pipeline of activity across all businesses and a focus on exploring more innovative ways to provide integrated solutions to meet our clients' needs.

Mindcrest (7% of Group Net revenue / 7% of Group Gross profit)

COVID-19 challenges combined with Insurance Law Reform hampered US external sales and UK Motor Volume growth respectively (the two largest Practice Areas within the Division). However, this disappointing performance was offset by significant growth (240%) of eDiscovery and much improved integration growth (57%) with Group key accounts, to deliver revenue consistent with the prior year.

COVID-19 has also impacted the speed of transition of certain legal workflows and legal support from the Legal Advisory division into Mindcrest. The stabilisation of COVID-19 in India will see a return to office working with various Group and Divisional initiatives underway to maximise the opportunity of transitioning work and optimising and standardising certain legal workflows.

Enhancing US presence, deleveraging key client concentration, investment into Legal Consulting and continued promotion of Service Transformation (which will mitigate current inflationary pressures) are key strategic objectives for FY2022/23. UK macro-economic inflation also provides growth opportunities to capitalise on market-leading propositions in UK volume litigation (Lender Services and Recoveries) as clients seek to control costs. It is with this backdrop that management can look forward to an improved year for the division in FY2022/23 focussed on unlocking significant benefits for both the division and the wider Group through this differentiating offering.

Direct costs

Direct costs, which reflect the salary costs of fee-earning partners and staff, have increased by £3m, or 2%, to £169m. The acquisitions of Zing and BCA accounted for £1m of year-on-year cost increases, so the underlying trend on direct costs was an increase of £2m. This increase reflects a combination of tight cost and recruitment control combined with investment in salary costs and selective hiring into growth areas of the business.

Gross profit

The combination of strong net revenue growth and strict control of costs has delivered a gross profit of £181m, representing a £9m, or 5%, increase vs. FY2020/21. This reflects a gross margin % of net revenue of 51.7% (FY2020/21: 50.8%). This improvement reflects uplifts across all divisions which is particularly pleasing given higher than expected absence rates in the second half of the year driven by COVID-19 as well as ongoing cost pressures.

Administrative expenses

Administrative expenses (including impairment) have decreased compared to the previous year, from £197m in FY2020/21 to £153m in FY2021/22. On an underlying basis, excluding adjusting items, administrative expenses for FY2021/22 are £134m (FY2020/21: £133m), which is consistent with the prior year after considering the acquisitions of Zing and BCA contributed additional costs of over £1m. This results in a cost-to-income ratio of 38.4%, a reduction of 0.8% from FY2020/21.

Improved cost control is a key component of the Group's strategy, ensuring the Group's resources are deployed in areas which support sustainable profitable growth. The control of underlying administrative expenses is therefore pleasing given the growth in the business in the year and against a backdrop of inflationary pressures on salaries and increases in energy costs. In addition, fewer COVID-19 restrictions have resulted in increases in travel and marketing costs as our colleagues spend more time working collaboratively with each other, and with our current and prospective clients. Whilst travel and marketing costs have increased they are still significantly below pre-COVID-19 levels, partly due to the restrictions that were in place during the year but also as we have taken the opportunity to closely review spend in all areas of administrative expenses.

Our cost base continues to be an area of focus for FY23, with the ongoing execution of our premises strategy expected to generate savings as we right-size our office space for our established hybrid working model. An estimated 1/3rd of the Group's global office space is considered as potentially surplus to requirements post-COVID which represents a c£7m recurring annualised saving opportunity in the medium term. Travel costs will be a particular focus area given that COVID-19 restrictions have eased but also to ensure that our colleagues are travelling with purpose in order to meet our ambitious environmental commitments. Other reductions in our existing overhead base are underway, to allow additional capital to be redeployed in areas of the business which will contribute to greater profitable growth.

Adjusting items have decreased significantly to £19m in FY2021/22 from £65m in FY2020/21. The table below provides more details with full analysis contained in note 2 to the financial statements:

Adjusting items in FY2021/22 can be summarised as:

1. Office closures and scale-backs which relates to the scale-back of operations in Australia, which began in FY21, and the scale-back of operations in Germany which commenced at the end of FY22. The amounts reflect a charge for working capital, impairment of assets and people costs in Germany, offset by the reversal of a provision in Australia as a sublease has been entered into during the year;

2. Acquisition related expenses principally relating to amortisation and impairment of intangibles recognised on acquisition as well as acquisition related remuneration expense from the Mindcrest acquisition, payments of which ceased in February 2022.

3. Share based payment expenses reflecting grants from the Employee Benefit Trust which is a pre-funded trust established on IPO; and,

4. Non-recurring costs relating to the refinancing of the Group's RCF facility.

Net finance expense & interest payable on leases

Net finance expenses relating to bank charges and borrowings were £3.7m (FY2020/21: £2.7m). Interest on bank borrowings increased by £0.5m as a result of an increase in interest rates and a lower level of debt in the prior year due to COVID deferrals. Bank and other charges includes a one-off charge of £0.4m for accelerated amortisation of bank fees connected with the previous RCF facility that has since been extinguished and replaced with a new facility.

Interest payable on leases of £1.7m (FY2020/21: £2.3m) reflects the notional interest cost relating to lease borrowings.

Profit/(loss) before tax

The Group reported a profit before tax of £22.3m (FY2020/21: £30.6m loss before tax), with the prior year reported loss before tax being driven by adjusting items totalling £64.8m referenced under the administrative expenses section above.

Adjusted PBT is £41.4m (FY2020/21: £34.2m) which represents a 21% increase on the prior year. Under new leadership the Group's strategy continues to be implemented operationally with a greater focus on sustainable growth, performance transformation and cost control. These factors together have generated an adjusted PBT margin (using net revenue) for FY2021/22 of 11.8% (FY2020/21: 10.1%).

Tax

The reported tax charge for the year, excluding prior year adjustments, is £6.1m (PY: 4.7m) on a profit before tax of £22.3m (PY: loss of £30.6m), representing an effective rate of tax of 27.4%. The effective tax rate was higher than the UK statutory tax rate primarily due to tax losses that have not been recognised as deferred tax assets (increasing the tax charge by £2.1m) and the tax effect of non-tax-deductible expenses (increasing the tax charge by £0.7m) offset by the effect on deferred tax resulting from the change in the UK corporation tax rate from 19% to 25% effective from 1 April 2023 (reducing the tax charge by £0.8m).

The Group also booked prior year tax adjustments of a net credit of £4.1m. Those adjustments arise principally as a result of (a) increased claims of the departing Australian partners on the Group's UK profit pool following the restructuring of the Group's Australian business in FY21 reducing the profits subject to UK corporation tax (£5.1m), offset by (b) revaluations of the Group's deferred tax assets relating to tax depreciation timing differences and expected tax deductions for share based payments as at 30 April 2021 (£1.4m).

This gives a net tax charge of £2.0m for the year (FY2020/21: £4.6m).

There are no open tax audits or investigations across the group. In line with group's tax strategy, it is not considered that any aggressive or materially uncertain tax positions have been adopted by any of the group entities. As such, the level of tax risk faced by the group is considered to be low.

EPS

Diluted EPS has increased to 6.5p in FY2021/22 from a loss per share of 11.9p in FY2020/21, the highest Diluted EPS result since the IPO. Adjusted Diluted EPS has similarly increased in line with the increase in adjusted PBT from 7.4p in FY2020/21 to 10.7p in FY2021/22, a 45% improvement, and again a record since the IPO.

Dividend

The Group's capital allocation policy is to prioritise having sufficient capital to fund ongoing operating requirements and strategic investment in the Group's long-term growth. Taking this into account the Board targets a pay-out ratio of up to 70% of adjusted profit after tax. For FY2021/22, the Board has declared a final dividend of 3.25p per share, taking the total dividend for the year to 4.75p (PY: 4.5p), reflecting a pay-out ratio of 44% of adjusted profit after tax (FY2020/21 61%). This pay-out ratio reflects a progressive dividend in absolute terms, but retains a proportion of FY2021/22 profits to invest in near-term growth opportunities. This final dividend is subject to approval at the AGM on 28 September 2022 and, if approved, will be paid on 7 October 2022 to all Shareholders on the register of members at the close of business on 9 September 2022.

Working capital, cash flow & net debt

The group measures working capital efficiency using "lock-up days". Lock-up days are comprised of two elements: Work-in-progress ('WIP days'), representing the amount of time between performing work and invoicing clients; and Debtor days, representing the length of time between invoicing and cash collection.

Driving working capital efficiency has continued to be a key focus for the Group in FY2021/22, with a number of operational improvements being effected in order to achieve a permanent reduction in the lock-up day cycle. Closing lock-up days at the end of April were 179 (FY2020/21: 184), a five day reduction and is the lowest level that lock-up has been for six years, despite an 88% increase in revenue over the same time period. The five day reduction comprises a one day increase in WIP days and a six day reduction in Debtor days. The WIP day increase is a product of a slight change in the mix of type of fee income, which is expected to be a timing issue only. The Debtor day reduction reflects an increase in the Group's cash collection efficiency and ongoing focus on operational discipline.

During the year, the Group has settled all remaining COVID-19 VAT deferrals totalling £10.7m. Under normal circumstances these payments would have been made in FY2020/21. In addition, the Group has had cash outflows in the year relating to closures & scale-backs of £3.8m. Normalising for the impact of these would have meant free cash flow of £27.4m. This compares against a reported free cash flow in FY2020/21 of £32.1m which benefitted from a significant working capital improvement, with lock-up days decreasing by 20 days, driven from a combination of operational improvements and also a catch-up of collections after the initial impact of COVID-19 led to a build-up of trade receivables.

As well as settling remaining COVID-19 VAT deferrals in the year the Group has also paid £3.5m in consideration for acquisitions with only £0.8m of consideration still to be paid as at the balance sheet date. As a result of these factors, net debt has increased to £71.8m from £60.2m at April 2021. The Group's strategy continues to be to manage borrowings such that the leverage ratio (borrowings as a multiple of adjusted EBITDA) reduces. Leverage at April 2022 has increased from the prior year to 1.08 (PY: 1.04) but the prior year included the benefit of COVID-19 VAT deferrals as explained above. The future reduction in leverage is expected to be achieved through a combination of profitable growth and net debt gradually reducing over time through working capital efficiencies.

The Group successfully completed a refinancing of its rolling credit facility ('RCF') in December 2021, obtaining a £100m facility with an additional accordion facility of up to £20m as well as a permanent relaxation of certain covenants. The facility is for an initial three year term with two, one year extension options. The Group expects to continue to operate well within its available facilities and for all covenants to be compliant for the remaining tenure.

Capital expenditure (Capex)

The Group is actively reviewing office space and will consider selective investments in office refits in the coming years as the premises strategy is executed, freeing up redundant space and investing cost savings into improving the remaining space. In addition, there has been continued investment into IT during the year as the Group builds its IT infrastructure to support our colleagues in delivering for our clients. Overall capex (excluding right-of-use asset additions under IFRS 16, and intangible assets recognised from acquisitions) in FY2021/22 was £7.9m compared to £10.6m in FY2020/21. The PY comparator included significant one-off investment into the new Pune office.

Current trading and future outlook

The performance for FY2021/22 reflects another strong year for the Group after a transformational recovery in FY2020/21. The results reflect record net revenue, adjusted PBT, EPS and lockup performance for the Group. As well as seeing significant organic growth opportunities from the existing client base, buoyed by our NPS score and client listening insights, the Group is actively pursuing a strong pipeline of M&A opportunities. Whilst macro-economic conditions suggest harder times ahead, the defensive nature of the Group's revenue being weighted towards litigation and the recurring revenue base in Insurance, protects the Group both from artificial peaks in growth but also hedges against a slowdown in transactional activity. The Group sees significant opportunity to apply self-help actions to control costs, with the premises strategy and various back-office initiatives offering protection from inflationary pressures.

Chris Stefani

Group Chief Financial Officer

21 July 2022

FINANCIAL STATEMENTS

Consolidated income statement

Year ended 30 April 2022

The results are from continuing operations.

Consolidated statement of comprehensive income

Year ended 30 April 2022

There is no taxation on items within other comprehensive income.

Consolidated statement of financial position

As at 30 April 2022

Consolidated statement of changes in equity

Year ended 30 April 2022

Year ended 30 April 2021

\* These movements have been re-presented to separately identify the recycling of share-based payments.

Consolidated statement of cash flows

Year ended 30 April 2022

Consolidated notes to the financial statements

Year ended 30 April 2022

1 Accounting policies

1.1 Nature of these financial statements

The following financial information does not amount to full financial statements within the meaning of Section 434 of Companies Act 2006. The financial information has been extracted from the Group's Annual Report and Financial Statements for the year ended 30 April 2022 on which an unqualified report has been made by the Company's auditors. The 2022 statutory accounts will be delivered to Companies House in due course.

Copies of the Annual Report and Financial Statements will be posted to shareholders shortly and will be available from the Company's registered office at 20 Fenchurch Street, London, EC2M 3AG.

1.2 Statement of accounting policies

The preliminary announcement for the year ended 30 April 2022 has been produced based on the Group's annual financial statements which are prepared in accordance with UK-adopted International Financial Reporting Standards. The accounting policies applied in this preliminary announcement are consistent with those reported in the Group's annual financial statements for the year ended 30 April 2022 along with new standards and interpretations which became mandatory for the financial year.

1.3 Going concern

The Directors have assessed the going concern basis adopted by the Group in the preparation of the consolidated financial statements, taking into account the current financial position including its available financing facilities, the business model and future outlook, as well as the principal risks as listed in the Strategic Report. The Directors conclude that the Group has adequate resources to continue as a going concern across the period of assessment.

Assessment of going concern

The going concern assessment has been considered for the period to 31 July 2023 and is carried out as follows:

· The Group's Board-approved budget base case is used to calculate the net debt position, liquidity and covenant compliance and available headroom over the going concern period.

· The assessment of going concern is carried out with reference to available financing facilities, the ability to pay debts as they fall due and the covenants associated with the financing facilities.

· Plausible downside scenarios are modelled to quantify the impact of an individual risk materialising over the going concern period.

· Mitigating actions which could be taken are identified, quantified and included in the assessment.

· The reasonable worst case scenario, along with mitigating actions, is then used to test that the Group would continue to have headroom in its available financing facilities, settle liabilities as they fall due and comply with the associated financial covenants over the going concern period.

Financing facilities

The Group closed the year with committed banking facilities of £127m (of which £97m were drawn). The largest of these is the £100m revolving credit facility ('RCF') which was re-financed in December 2021 to increase the facilities available to the Group. This RCF has an initial maturity of three years, with two one-year extensions. The undrawn portion of the RCF is readily accessible and does not require any further approval for drawdown by the Group's banking syndicate. Associated with the facility is a further £20m accordion facility which is available on the same terms as the original RCF but is subject to the agreement of the banking syndicate for drawdown. The modelled assumption is that we do not draw on this. The facility agreement also permits the Group to obtain a further £30m of external funding and £15m of leasing facilities, if required. The covenant thresholds across the assessment period are set out below:

Each of the covenants noted above is measured on a pre-IFRS 16 basis in accordance with the banking facility agreement. Interest cover is defined as the ratio of EBITDA to interest expense, and leverage is defined as the ratio of net debt to EBITDA. The Group's budget anticipates a cash inflow during the going concern period, whereas 2021/22 reported a cash outflow although this was because of the repayment of all remaining COVID-19 VAT deferrals of £10.7m in the year as well as the payment of acquisition related consideration.

Future outlook, risks and uncertainties

The going concern and viability assessments are closely linked and therefore the conclusions of the going concern assessment are directly relevant to and should be read in conjunction with the viability statement. The Board-approved base case combined with the annual three-year plan have been used to measure the going concern and future viability of the Group. This includes monitoring net debt positions and cash management activities of the Group and their effect on covenant testing. The going concern and viability of the Group have been assessed taking into account the potential impact of certain scenarios arising from the principal risks and uncertainties.

In particular, the Board has considered the impact of a range of potential M&A activities including impacts on net assets, cash flows and covenants. In addition the assessment considers the reduction in demand caused by either macro environmental factors, commercial pipeline, our ability to retain or attract the correct level of talent as well as inflationary pressures over and above the base case.

Mitigating actions

If faced with the reasonable worst-case scenario, the Board also considers possible mitigating actions available to the Group to maintain liquidity and covenant compliance. These can be swiftly implemented should the worst-case scenario arise and include (but are not limited to):

· freezing recruitment and a slowdown in investment in recruitment and reward;

· reducing discretionary operating spend such as marketing and travel;

· reducing non-committed capital expenditure;

· revision of the existing dividend policy; and

· cost cutting measures in non-fee earning areas including an acceleration of the execution of the Group's real estate strategy and a reduction in headcount.

Reverse stress test

In addition to the modelling of the above scenarios, a reverse stress test was conducted by the Group to assess the quantum of increased inflationary pressures and downside on trading performance that would materially impact our ability to comply with financial covenants. Such a material impact is not considered a reasonable scenario to adversely impact the going concern assessment.

Conclusion

Based on this assessment, the Directors have a reasonable expectation that the Group has sufficient resources to continue its operations for the period of assessment. In particular the Directors have a reasonable expectation that it will operate under its existing financing facilities, will comply with all covenants with adequate headroom and settle all other liabilities as they fall due. The Directors therefore consider it appropriate for the Group to adopt the going concern basis in preparing these financial statements.

1.4 Re-presentation of comparative period

The consolidated statement of financial position has been re-presented for the comparative period to present the IFRS 16 right-of-use assets as a standalone financial statement line item in order to provide users with clearer information on the leased assets. note 11 now comprises solely the property, plant and equipment information, and note 12 comprises solely IFRS 16 right-of-use asset information.

This note is intended to disclose material re-presentations within the primary financial statements. For other re-presentations within note disclosures, explanations have been provided within the note that has been changed.

2 Alternative performance measures ('APMs')

APMs are not intended to supplant IFRS measures but are included in response to investor feedback or to provide readers of the financial statements with additional understanding of the underlying trading performance of the Group.

APMs are fully defined and information as to why they are useful is provided in the glossary.

Adjusted profit before tax reconciles to profit / (loss) before tax as follows:

Adjusted PBT reconciles to profit / (loss) before tax with reconciling items by nature as follows:

Cash used to settle non-underlying items includes £3.8m (FY2021: £2.3m) relating to closures and £4.6m (FY2021: £6.9m) relating to the remuneration element of purchase price payments for acquisitions.

Non-underlying items are set out in the table below:

a. The Group periodically considers and analyses potential acquisition targets and recognises there is inherent complexity and risk associated with acquisitions. The Group manages this by employing external professional advisors to perform legal, financial, commercial and tax due diligence on targets. These costs relate to opportunities the Group identifies and pursues, of which a portion result in successful acquisitions. Acquisition fees in the current period relate to the acquisitions of Zing and BCA.

b.  No fees have been incurred in the current period for aborted acquisitions. Prior year aborted acquisition-related advisory fees are releases of accruals for work done in FY2020 that were credited following the decision to abort the transaction.

c. Acquisition-related expense relates to the remuneration expense from the acquisition of Mindcrest in FY2020. Payments to the sellers of Mindcrest were deemed to be remuneration (and not consideration) under IFRS 3, and therefore expensed over the deemed service period rather than included in goodwill. As these costs are not considered recurring and ceased in February 2022, they have been included within adjusting items in order to give greater clarity of underlying trading performance. The prior year comparator is of the same nature but relates to both the Mindcrest and RCD acquisitions, including the costs relating to the modification of the RCD acquisition agreement (see note 9).

d. COVID-19 related costs were incurred between March 2020 and October 2020 and relate to one-off additional expenses for IT support and sanitisation of offices that covers the period of the first UK national lockdown. As the Group was not making use of its UK offices during this period and was already supporting agile working across its workforce, these costs are one-off and specifically as a result of COVID-19.

e. Closure and scale-back of operations in the current year relate to the scale-back of the operations in Australia, which began in FY2021, and Germany. The credit in the current year principally reflects working capital provisions made for Germany, offset by the reversal of a provision made for Australia in FY2021. The prior year costs relate to the Board decision to close the Singapore and Brussels offices and to scale back the operations in Dubai and Australia. These costs comprise people and supplier exit expenses as a result of the decision taken.

f. Costs of the prior year relate to the one-off costs for the change in CEO.

g. These costs are associated with the re-financing and include professional fees incurred that are significant in value and by their nature are not recurring annually. More detail around the refinancing can be found in note 17.

The cost to income ratio is used to assess the levels of operational gearing in the Group. The cost to income ratio is defined as administrative expenses less adjusting items and divided by net revenue and is calculated as follows:

3 Operating segments

Reporting segments

In accordance with IFRS 8: Operating Segments ('IFRS 8'), the Group's operating segments are based on the operating results reviewed by the executive directors of the Board, who represent the chief operating decision maker ('CODM'). The Group has the following three strategic divisions, which are its reportable segments. These divisions offer different services and are reported separately because of different specialisms within teams in the business group.

The following summary describes the operations of each reportable segment:

The revenue, net revenue and gross profit are attributable to the principal activities of the Group.

Effective from 1 May 2021, the Group changed from five strategic divisions to three more streamlined, consistent and efficient global divisions that match the Group's strategy.

The comparative period table below has been re-presented to reflect the current divisional structure.

For year ended 30 April 2022

For year ended 30 April 2021 - Re-presented

There are no inter-segmental revenues which are material for disclosure. Administrative expenses represent indirect costs that are not specifically allocated to segments.

Non-current assets, revenue and net revenue by region

The UK is the Group's country of domicile and the Group generates the majority of its revenue from external clients in the UK. The geographical analysis of revenue and net revenue is on the basis of the country of origin in which the client is invoiced.

The Group's non-current assets, net revenue and revenue by geographical region are as follows:

\* The revenue and net revenue for 2021 have been re-presented for consistent comparison with 2022 to reflect a change in the allocation of which countries were included in Asia and Rest of World.

Total assets and liabilities for each reportable segment are not provided to the CODM and therefore not presented.

4 Operating profit and auditor's remuneration

5 Net finance expense

6 Taxation

The effective tax rate is lower (2021: higher) than the average rate of corporate tax in the UK of 19% (2021: 19%), and excluding prior year adjustments the effective tax rate is higher than the average rate of corporate tax in the UK. The difference is explained below:

In the Spring Budget 2021, the Government announced that from 1 April 2023 the corporation tax rate will increase to 25%. The proposal to increase the rate to 25% was substantively enacted on 24 May 2021, therefore the relevant deferred tax balances have been remeasured. The impact of the change in tax rate has been recognised in tax expense in the income statement, except to the extent that it relates to items previously recognised outside the income statement.

The reported tax charge for the year, excluding prior year adjustments, is £6.1m on a profit before tax of £22.3m, representing an effective rate of tax of 27.4%. The effective tax rate was higher than the UK statutory tax rate primarily due to tax losses that have not been recognised as deferred tax assets (increasing the tax charge by £2.1m) and the tax effect of non-tax deductible expenses (increasing the tax charge by £0.7m) offset by the effect on deferred tax resulting from the change in the UK corporation tax rate from 19% to 25% effective from 1 April 2023 (reducing the tax charge by £0.8m).

The Group also booked prior year tax adjustments of a net credit of £4.1m. Those adjustments arise principally as a result of (a) increased claims of the departing Australian partners on the Group's UK profit pool following the restructuring of the Group's Australian business in FY2021 reducing the profits subject to UK corporation tax (£5.1m), offset by (b) revaluations of the Group's deferred tax assets relating to tax depreciation timing differences and expected tax deductions for share based payments as at 30 April 2021 (£1.4m).

7 Dividends

Distributions to owners of the parent in the year:

The Board recommended a final dividend for the year ended 30 April 2022 of 3.25 pence per share on 20 July 2022 which is subject to Shareholder approval at the Annual General Meeting on 28 September 2022. If approved by the Shareholders, the dividend will be paid on 7 October 2022 to all shareholders on the Register of Members on 9 September 2022.

8 Earnings per share

*For the year ended 30 April 2021, potential ordinary shares of 17,067,508 are anti-dilutive, as their inclusion in the diluted loss per share calculation would reduce the loss per share, and hence have been excluded.

Adjusted basic and adjusted diluted earnings per share are APMs (as defined in the glossary) and have been calculated using profit / (loss) for the purpose of basic earnings share adjusted for total adjusting items and the tax effect of those items.

Adjusted basic and adjusted diluted earnings per share may be reconciled to basic earnings per share as follows:

Shares held in trust are issued shares that are owned by the Group's employee benefit trusts for future issue to employees as part of share incentive schemes. These are recognised on consolidation as treasury shares. The future exercise of share awards and options is the dilutive effect of share awards granted to employees that have not yet vested.

Share held in trust are deducted from the weighted average number of ordinary shares for basic earnings per share. For its adjusted basic measure, the Group uses the weighted average number of ordinary shares.

The definitions of adjusted basic earnings per share and adjusted diluted earnings per share can be found in the glossary to these financial statements.

9 Acquisitions of subsidiaries and transactions related to previous acquisitions

Acquisitions in the year to 30 April 2022

Two acquisitions were made in the year; Zing 365 Holdings Limited ('Zing') and BCA Claims and Consulting Limited ('BCA'). Details of the acquisitions are as follows:

Zing is a compliance training business based in Bristol, and was purchased to support growth in the Connected Services division through offering additional services to the Group's clients. BCA is a market-leading claims handling business based in Vancouver, acquired to increase the Group's presence in the local market.

The fair values of the assets and liabilities and the associated goodwill arising from the acquisitions are as follows:

Of the £2.3m consideration for BCA, £1.4m is deferred and payable over two years post-acquisition. This is not contingent on future performance targets. During the period £0.61m of deferred consideration has been paid.

The goodwill is attributable to the benefits of operating two already well-established businesses in the relevant sector and the synergies that are expected to be achieved from incorporating the businesses into the Group's operations. As the purchases were not made with any qualifying intellectual property, all goodwill acquired is non-tax deductible.

The following intangible assets were recognised at acquisition. These have been measured at their fair value through the multi-period excess earnings method (customer relationships) and royalty relief method (brand).

Cash flows arising from the acquisition were as follows:

The table below outlines the revenue and PBT of the acquirees since the acquisition date, which is included in the consolidated statement of comprehensive income for the year, and the annualised revenue and PBT of the acquirees had the acquisition dates for the business combinations been at the beginning of the year:

Transaction costs comprised mainly advisor fees, including financial, tax and legal due diligence. These are all included within administrative expenses (non-underlying items) within note 2.

Acquisitions in the year to 30 April 2021

There were no acquisitions during the year.

On 22 January 2021 DWF Group plc and the original sellers of Rousaud Costas Duran S.L.P. ('RCD'), a Spanish subsidiary, mutually agreed to modify the acquisition agreement and related documents ('RCD Documents') entered into on 20 December 2019 to help facilitate the integration of DWF-RCD into the wider Group as part of moving to the new operating model effective from 1 May 2021.

Full details of the modification can be found in the Annual Report and Accounts 2021 at www.dwfgroup.com.

10 Intangible assets